QUESTION: I currently represent the Buyers on a Property listed by another Broker. The home inspector noted that there was evidence of past water intrusion on the garage wall (“efflorescence”) that is attached to the home but he could not determine the cause of the leak. I could not see any damage except the staining on the garage wall.
After reading the home inspection report, the Buyers sent me an e-mail saying that they are worried that there may be hidden problems caused by the water intrusion – they are terribly concerned about the possibility that there is mold. The Buyers have asked for my opinion as to what to do next. They have not removed their investigation contingency. What recommendations should I make to help my Buyers? What steps should I take to protect myself?
ANSWER: Any time that a client expresses concerns about issues that cannot be visually detected and/or there are any “red flags” of past or present water intrusion, the Agent should recommend, in writing, that the Buyer:
(1) Not remove the inspection contingency until the Buyer is satisfied as to the cause of the “red flag” (in this case the water leak) and the extent of any damage;
(2) Not rely solely on what the Seller has disclosed or might explain about the “red flag;”
(3) Investigate the issue using appropriate professionals; and
(4) Conduct further investigations, especially those that are recommended by any inspectors, advisories and pamphlets.
Water intrusion has traditionally been one of the leading causes of post-close of escrow claims by Buyers. Sellers have been known to down-play the significance, frequency and/or cause of water intrusion incidents. Sellers also tend to over-sell the effectiveness of any remedial work that has been performed, such as plumbing and roof repairs, sump pumps, moisture barriers and drainage work.
If there is any evidence of past or present water intrusion, whether or not any corrective measures have been taken, the “red flag(s)” should be disclosed, in writing, to the Buyer along with all four of the recommendations detailed above.
There are many “red flags” of water intrusion including, but not limited to, ponding water around or under structures, exterior and/or interior stains, musty smells, moist sheet rock, and efforts to remove moisture or redirect water on the Property. Agents and Buyers should never assume that past efforts to remediate any water intrusion problems were done properly or thoroughly; no one should assume that any repair efforts will eliminate the possibility that there will be future water intrusion.
Who are the appropriate professionals to investigate the “red flags” of water intrusion? Leak inspectors may be able to discern the location of the leak but the recommendation for further inspections should not stop with that type of professional. Only structural engineers can determine the structural integrity of the Property, especially the condition of the foundation; only soils engineers can determine whether the existing drainage work is adequate. Contractors and handymen should not be making those assessments.
The crucial further investigation in this situation is to recommend that the Buyer have an environmental specialist conduct a mold inspection. That is the recommendation that is made in the Residential Environmental Hazards: A Guide to Homeowners as well as in several real estate industry Advisories.
If the Buyers in this situation follow the Agent’s advice and secure a mold inspection, recommend to the Buyer that the environmentalist’s investigation:
(a) Not be limited in scope to the area where the water intrusion was detected but should test the entire house and the garage;
(b) Include comparison testing of the interior of the structures and the exterior to ascertain the significance of the presence of mold within the structures; and
(c) Culminate in a written report detailing the precise cost of the mold remediation that is needed, if any, and how long it will take to complete the required work.
Real estate professionals are not qualified to determine the nature and extent of water intrusion issues or the presence of mold. Agents should defer such assessments to the appropriate professionals.
BEST PRACTICE TIPS:
- As part of every Agent’s visual inspection of the accessible areas of the Property, look for the “red flags” of water intrusion and make sure that this red flag is disclosed to the Buyer, preferably in the Agent’s Visual Inspection Disclosure.
- It is always a best practice for Buyers’ Agents to make the four recommendations above especially when the Buyer has expressed any concerns about the “red flag.” Those recommendations should be made in writing in either the Agent’s AVID or in an e-mail to the Buyer.
- Regardless of who you represent, make certain that the Broker file contains proof that the Buyer has actually received the Residential Environmental Hazards: A Guide to Homeowners and not just a link to access the pamphlet.
- Regardless of who you represent, do not adopt the Sellers’ information/explanations as your own. The Sellers may state their beliefs that a problem has been repaired but the Agents should make it clear that: “The Sellers state ….” rather than: “I know the Sellers have … .”
- Agents should not forward information from Sellers to Buyers without including the necessary disclaimer:
“I DID NOT, AND WILL NOT, INVESTIGATE OR VERIFY THE INFORMATION PROVIDED BY OTHERS”
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2019 10/04/19